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Tax Revenue Implications of Decarbonising Road Transport

Scenarios for Slovenia

image of Tax Revenue Implications of Decarbonising Road Transport

This report investigates how tax revenue from transport fuels could evolve over time as vehicles rely less on fossil fuels, with a focus on the case study of the Republic of Slovenia. Reducing the reliance on fossil fuels in the transport sector is a welcome development from the perspective of its climate and health impacts and of reduced energy dependence. However, under current settings, reduced fuel use will also lead to a loss of tax revenues, which may put stress on government budgets. Based on simulations for Slovenia, with a 2050 horizon, the report provides an in-depth assessment of the taxation of road transport and investigates how tax policy could adapt to declining fossil fuel use in the long term if the objective is to maintain revenues at current levels while taking fairness and efficiency considerations into account. It finds that gradual tax reforms, with an evolving mix of taxes, shifting from taxes on fuel to taxes on distances driven, can contribute to more sustainable tax policy over the long term.

English

Tax reform simulations to stabilise revenues

This chapter studies options for tax policy reforms designed to stabilise tax revenues in the road transport sector at current levels, in the long run. It simulates the potential impact of tax reform on revenues for the main technology scenario, considering behavioural adjustments. The focus is on the passenger car segment of the market, where the erosion of the fuel base is expected to be at its highest. The following tax reforms are considered: increasing conventional fuel or carbon taxes on gasoline and diesel, adapting the taxation of motor vehicles and charging based on distances-driven.

English

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